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"Peak oil" theorists: World running out

The world is running out of oil faster than society suspects, and last year's $4.11 gasoline spike was just a bitter hint of the future, according to a "peak oil" theory whose key proponents will gather in Denver this week.

Though peak-oil theorists prompt scorn from many in the petroleum industry, they've attracted an audience in some political and financial circles with their warnings to avert disaster by conserving, diversifying and exploring at an urgent pace.

"Up until now, technology has delivered dazzling results to America and the world economy, in delivering oil from all around the world despite increasingly challenging environments," said Dave Bowden, executive director of the Denver-based Association for the Study of Peak Oil & Gas-USA, or ASPO. "The harsh reality is, despite the best efforts of amazing technology, they're not finding as many of these big fields anymore."

Peak-oil theorists who group under the ASPO umbrella say world production of the vital liquid is at, or just a couple of years shy, of its absolute high point. Once oil companies begin to squeeze less and less from the ground each year — while demand skyrockets in developing China and India — spot shortages will blow up prices, shock economies and destabilize governments.

Proponents will trade proof and seek solutions beginning today at their international peak-oil conference, at the Sheraton Denver Downtown Hotel. The group urges starting work on mitigation steps immediately:

• Mandate higher auto efficiency to cut oil use, with an achievable goal of doubling fuel economy within 10 years.

• Review and potentially remove limitations on offshore oil drilling, in order to boost supply while conservation efforts gain hold.

"The U.S. has the ability and the technology to cope with this problem through thoughtful planning, meaningful conservation measures and forward planning," Bowden said. "Are we going to wake up to that, or are we going to follow the path of at least the last three to four decades, of only reacting to each price spike?"

Though the peak-oil movement has some individual supporters inside major oil companies and trade groups, the concept is pooh-poohed or ignored by most of Big Oil.

Those analysts tend to agree with the federal Energy Information Administration, that peak world oil production is not imminent but more likely 20 to 40 years away. They argue that an oil catastrophe will be kept at bay during those decades by the natural cycle of rising prices prompting conservation and alternative fuel sources.

When the world was running out of whale oil for lighting in the 1800s, economies moved to kerosene, Lynch said. If oil stocks do indeed become more scarce, an abundance of natural gas will become one of the transition fuels for developed nations.

Peak-oil questions will not be the primary worries for either society as a whole or the oil and gas industry in coming years, Lynch said.

"What will drive us is the overall economy" and whether more nations begin to impose carbon taxes to fight global warming in the next few years, he said.

One of the more visceral arguments of peak-oil supporters shows production already past the high in dozens of nations — the Lower 48 states of the U.S., for example, passed their peak in 1971, Egypt in 1993, etc. As each nation goes, so goes the world, peak-oil theorists claim, and oil companies won't be able to keep boosting annual output past about 2015 at the latest.

World reserves, meanwhile — the pool from which that annual production is drained — are being depleted by about 4 percent a year, ASPO says. That leaves the world margin of error far too small, and vulnerable to disruptions such as rebel attacks on Nigerian pipelines or disputes with Iran about nuclear weapons and oil supplies.

Skeptics agree on one thing: World politics are one key to the issue. But high prices tend to push politicians to supply more oil, eventually, Lynch said. Russia's oil production appeared on the decline until politicians there lowered taxes and encouraged drillers.

While peak oil tends to focus on threats to the economy, it also can produce regional winners, said Wall Street oil analyst Steve Kopits. T. Boone Pickens and other major players have been talking up natural gas as a cleaner and more abundant replacement for gasoline in vehicles.

If those efforts gain traction, Kopits said, "Denver is going to be a big boomtown" because of huge pools of gas under the Rocky Mountains.

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